I must advise you that this conference is being recorded today, Tuesday the 28th of May, 2019. I would now like to turn the conference over to your speaker today, Gregers Wedell-Wedellsborg. Please go ahead, sir.
Thank you. Welcome everyone to the conference call covering the Matas annual report for 2018 and 2019. With me on the call, I have Anders Skole-Sørensen, CFO, who will cover the numbers in a moment, and Elisabeth Toftmann Klintholm, who is head of IR. Please turn to slide 2. The highlights for this call and for the year, I would like to run through briefly. First, Q4 results came in with a positive like-for-like of 2.1 and continued gross margin stabilization. The financial year overall results were in line with our guidance. We have seen very good progress on all strategic tracks. Tagging back to our strategy that we announced a year ago on our Capital Markets Day, I would particularly like to highlight that online sales at the end of the year are now at 11% versus 4% a year ago.
Today, also, we have announced the acquisition of Kosmolet, the owner of the leading makeup brand in our stores. We add that to our own brand portfolio. We have announced that we will pay a dividend per share of DKK 3, reflecting the two acquisitions that we've made this year, Firtal Group and Kosmolet. The expected investment ramp-up. As for the guidance for the year 2019-2020, we expect top line growth. We also expect positive like-for-like. The year will be marked by the planned ramp-up in CapEx. The next year also will see a margin contraction that is due to two factors. One is that the online business is now of a size that it is significant to the business, and we have some dilutive effect of the online business. I will get back to that in a moment.
It's also a year where we will invest not only CapEx, but also resources and add costs to drive future growth initiatives. Finally, we guide for that going forward, we expect to pay out a dividend at a ratio of minimum 30% of adjusted net profit after tax. Please turn to slide number three. The year overall came in within our expectations. We have three guideposts for the long term that we want to lift customer engagement over the strategy period. We have announced that it is a growth strategy, and our way of dealing with the changes in the retail environment is to go for growth, targeting in 2022, 2023, around DKK 4 billion. Finally, we expect pressure on the margins, but expect that at the end of the strategy period, we will be at a sustainable EBITDA margin level before exceptionals above 14%.
We came in at 15.5% this year against our guidance of above 15%. For the year, we've made very solid progress on the strategy that we announced a year ago, I would like to highlight just the three most important areas. If you please turn to slide number four. Our main priority for the year has been to kickstart and ramp up our digital efforts, we have made very satisfactory growth this year. We have invested in all areas of the digital experience, from being present on social media, Google search engine marketing, and throughout the experience on matas.dk, and then also on fulfillment and new business models with the introduction of a new subscription feature. Behind the scenes in the company, we have invested in adding leadership and good resources, new kinds of competences to meet the demand and drive future growth.
As a result, as I mentioned before, revenue from online sales rose from 4% in Q4 of last year to 11% this year. matas.dk, our own omnichannel proposition, grew with 54% for the year and amounted to 5% of group revenue in total for the year. In total, 7% of group revenue came from online compared to last year, that, of course, is due to the addition of Firtal Group, which is in the numbers from November last year, mid-November last year. As I mentioned, this rapid online growth is slightly margin dilutive. Online is profitable business unit to us, but it is slightly less attractive on the margins for now than the physical stores. However, we have seen in the year and continue to see scale benefits in online becoming more profitable as online grows.
We have also seen an uptick in gross margin in our online business. Please turn to slide number five. For our physical stores, this has been a year of preparation, really, but also some adaptation of the physical store network. We continue to measure our success as omni like-for-like. That is the combination of sales in matas.dk and sales in the stores. Because that is really what is important, that we capture the sales from the customers and are agnostic to the channels. The positive like-for-like growth in 2018-2019 are primarily driven by online. However, we would like to note that a good part of the physical store network contributes to the positive like-for-like development. We do have a number of stores, and a good number of stores, that are capable of driving positive like-for-likes even in the current environment.
In total, the physical store network is a negative on overall like-for-like, but a slightly less negative impact than we've seen the year before. We have included more information on like-for-likes in the appendix, and on the slide, you can see that we've also made a lot of progress on rotating brands, one of our priorities in the strategy, and that we have started out piloting our new store format, the new generation of the classical Matas store with four pilot stores in the year gone by. Please turn to slide number six. On the Capital Markets Day, we pointed out that we see the green market, which we consider to be the market for Vital Shop, that is vitamins and supplements and minerals, together with natural beauty as an attractive growth area.
A lot of consumer demand in that particular area, found that we were well positioned to gain a bigger share of that market. We've made a lot of progress on that particular priority in the year. We purchased the Firtal Group, Firtal Group's main activity is Helsebixen and Jala Helsekost, which are two of the leading sites offering vital products in Denmark. We opened two concept stores. We don't expect to open more stores. We opened them to add to our green profile and to be able to source products that we could not source to our existing business. We've got very good customer feedback on those two stores. We have also added a green online store on matas.dk to make it easier for the consumer to find products within the green area.
Finally, in our marketing overall and how we use our store real estate, we have added more focus to the sale of green, sustainable, clean products. The result has been a growth of 12.6% for the year. Please turn to slide number seven. Behind the scenes, I would like to highlight a number of changes that we're making. We have focused this year, in particular, on supplier alignment, getting strategic long-term alignment with our suppliers. We think that making sure that suppliers and retailers go hand in hand through the transitions in retail is of key importance. Our suppliers have been supportive with regards to our competitiveness and with regards to supporting our promotion level for the year.
We have also changed the tack on how we run promotions to get more bang for the buck and see more effect out of our promotional activities by using data to a larger extent than we have ever done before. That is the final remark that I have on this, is that we are adding quite a lot of new competencies to our business to make sure that we have the people and the skills to compete in the future retail environment. This is particular on the ability to use all the customer data that we have to be effective in our promotions and in how we set assortment, and of course, in driving and becoming a much more digital company overall.
That concludes my initial remarks. If you please turn to slide number eight, I will pass over to Anders Skole-Sørensen f or remarks on the key figures.
Thank you, Gregers, good morning. On slide eight, you'll find key figures for the financial year. I will not go through this line by line, share with you some flavor on the development in sales and gross profit and gross margins initially. We start off by sales, we can look at a 2.2% overall revenue growth, we look into what's underneath of that, we had overall beauty sales growing by 1.7%. As you well know, beauty is more than one thing. It's a lot of things. The way we look at it, we split it up in what we call high-end beauty.
Some of you, I'm sure are familiar with that being the areas where we have selective distribution, that is the high-end products like the Dior and Chanel of this world, and then what we call mass beauty, and those are the beauty products that you can also find in supermarkets and so forth and so on. We take that dive down and look not at just at the headline, the 1.7%, we will see that high-end beauty, which accounts for about 38% or did last year account for 38% of sales, actually increased by 3.5%, continuing the trend that we've been seeing for a while. Mass beauty, which is about precisely 33.3% of total sales last year, actually was stable, or rather, yes, there was a very small decrease which is actually better than what we've seen over the last years.
Vital, Gregers has already mentioned, increased by 12.6%, of course, Gregers has already mentioned this, the add-on of the Firtal has made a quite significant impact on these numbers because they're primarily within that area. Without getting into too much detail, I can definitely add the flavor that we also had growth in, so to speak, the pure Matas business environment. Material was pretty flat with a small increase of 1.2%, as you know, that is a smaller and smaller area of our business. While the Matas MediCare, which is by far the smallest of our shop-in-shop, decreased marginally by 0.7%.
What we have as the rest, which is wholesale and other sales decreased, both of them wholesale particularly because the last of the associated source left the business, and we also have some more technical adjustments concerning Club Matas, points of no really great importance. I might just, in this connection, add that if we look at overall sales, we should also look at the number of transactions and what happened to the average basket that's not in these figures, but it's in the account. We look at that, we can see that the number of transactions still had a slightly negative development falling by 0.9% in the year, which, of course, is not ideal. On the other hand, we had a very positive growth in the average basket, which rose by 2.6%. That added to the business.
We then take a look at the gross profit and gross margin. Well, gross profit increased by DKK 40 million or 2.6%, and that was obviously driven by the higher sales, but also by a marginal increase in gross margin. As you see, it went from 44.7 to 44.9. That was, I can take that back to what Gregers has already mentioned, looking at markdowns, looking at improved price management, and actually looking at an even closer connection or collaboration with our suppliers. With that, let's turn to the next page, slide nine, where we look a little at the longer-term trends in both sales, gross margin, and EBITDA, and actually also a bit on inventories. The numbers are pretty self-explanatory. I'd just like to highlight a few things on these slides.
We look at revenue growth. We are pleased to see that the 12 months trailing like-for-like growth, which is quite important sort of sell weather of the trend. As you know, actually got above the zero point at the end of the fourth quarter, and we do see more optimistically on that, which is also reflected in our patterns for next year. We look at gross margins. I will venture to say that we think we've seen a stabilization. We think the numbers actually prove that point. If you look at the development in LTM gross margin, you can see that it has been fairly stable over a number of quarters now.
With regards to the EBITDA margin, that is still on a slightly negative trend. As Gregers has pointed out, I'll just come back to it in a little more detail, there are some dilution effects from the growth in online, which is also playing a bit of a role here. Finally, with regard to inventories, last quarter, I think there were a few people who had a slightly lifted eyebrow when they saw the number on inventories at above DKK 900 million, which is more than DKK 100 million above what it had been at the end of the third quarter last year. We're quite pleased to see that the number has come down.
We are still above what we were at the end of the fourth quarter in 2017/18. You have to remember that we have added Firtal in the meantime, and also just taking you back to what Gregers has already showed you can actually see that there has been an increase in the number of brands that we carry, and when you add on an extra brand, that has some effect on your inventory levels. The big jump has been whittled out of the numbers, and it is a more stable development. With that, please turn to page 10 or slide 10, where we'll talk a little more about the cost development. When we take a look at the other external costs, obviously the headline growth of 11% looks a little steep perhaps.
Of course, it should be noticed that there is some cost that has come into the picture which we didn't have. First of all, there's the operating cost from the Firtal Group, which came in at the middle of November 2018, and that includes marketing expenses, and obviously, Firtal Group being an online business, has more marketing expenses. Marketing expenses are bigger as a share of sales than it is in the Matas as a whole. We've also seen, as Gregers has mentioned, much higher activity on our webshop, matas.dk, and that has driven some costs which are relating to actually running a webshop. It's the operations, it's the freight, it's the logistics, all of which actually go up, and it's part of our external cost as sales rise. Finally, of course, there were some transaction costs in connection with the acquisition of Firtal Group.
If you take that into account, yes, there still is a rise in other external costs, and that is if you take out the non-recurring one. There's a rise from 9.0% of sales in the last financial year to 9.6% of sales in this year, but it is more muted. With regard to staff costs, the development is absolutely not drastic. However, there's a bit of a few moving parts underneath of that number. First of all, non-recurring staff cost actually was lower in 2018/19 compared to 2017/18, because in 2017/18 we had the DKK 14 million related to the change of the CEO. Of course, also on this particular point, staff costs were influenced by the acquisition of Firtal, which adds some staff costs.
If we take those out and look at the underlying staff costs in, or as I've sort of said here, like-for-like, but it's close enough. Underlying staff costs in the Matas business, they were up by DKK 12 million or about 1.8%. That is mainly linked to the fact that we have collective wage agreements with some tick up in wages as we go along. Moving along to the next page 11. We're looking at the cash flow and working capital. There I just have a few comments to make. If you look at the numbers, cash generated from operations increased by DKK 60 million. If you look at net working capital, the way that it's defined in the accounts, it looks a bit odd because it looks as if we have a rise of DKK 68 million in the net working capital.
That is actually, it doesn't really reflect the underlying business because what happened, and it's been explained, and I can come back to you in the question, there has been a reclassification of around DKK 80 million which we used to have as a claim on the tax authorities, and now it's been moved to other receivables. That technically puts it into the working capital, even though I would say from an operating point of view, it has nothing to do with working capital. What I would call the underlying net working capital actually fell in the year marginally. Yes, there were increases in inventories, but that was financed by higher debt suppliers. In that way, the increase in inventories was financed by our suppliers. With regard to taxes and interest, that fell marginally from DKK 123 last year to DKK 116 this year, basically fairly stable.
CapEx increased. As you know, we have had increased investment both in our physical stores and in our online business. That was a big, fairly large jump of DKK 36 million in that. Of course, the acquisitions jumped by over DKK 100 million due to the acquisition of Firtal. In consequence, when we look at the free cash flow, there was a drop from DKK 280 million to DKK 212 million when you add all these things up. Finally, on page 12, we've given you some numbers on the IFRS 16 effect. That actually has technically nothing to do with these numbers in 2018/2019, because as you know, IFRS 16 is only taking effect as we go forward. Nonetheless, we wanted to give you the numbers so you can see what happens.
I don't think it will come as a surprise to anyone that given the fact that we have almost 280 stores that we rent, it has some meaningful effect on our numbers. As we show a jump in EBITDA margin by about four percentage points. That means that if we come back to in the guidance, you just have to basically add 4% to the numbers in the guidance to look at it on an after IFRS 16 basis. On top of that, there is quite a marked effect on our balance sheet as both assets go up and liabilities go up. Technically, these liability goes up by just shy of DKK 800 million and as a non-current and around DKK 152 million, which is current. That's just a question of when it is time, and that is equated to DKK 950 million of these assets.
Of course, when you add it up, it zeros out. With regards to guidance on gearing and so forth, the reason why, we may mention it later on, but let me just mention it right now. The reason why we are keeping guidance on gearing and so forth in the pre-IFRS world is because our financing arrangement, our loan arrangements, are all defined pre-IFRS 16. That's actually the relevant number to look at when you look at our gearing numbers, because it's the number that the banks look at. With that, I will hand you back to Gregers. If you have questions, we'll take them at the end of the presentation.
Thank you, Anders. I will look ahead at how we will execute our strategy in the next year. If you are at page 13, you will see our strategic framework. Three particular areas where we will invest and ramp up for the year to come. First is our online growth, which we have mentioned a number of times. We've seen a breakthrough this year. We will continue to fuel our online growth both in matas.dk and with the Firtal Group for the coming year to make good on our promise to grow faster than our competitors every year throughout the strategy period, with the ultimate goal of becoming the undisputed market leader online. Second, this is going to be a year where we ramp up investments in the stores.
We have piloted the new store format throughout the spring and early summer. Next year, we plan to upgrade at minimum 30 existing stores to the new format. In that process, we do a bit of remodeling on our store network, because this is a good opportunity for us to look at locations, look at expansions, look at consolidations. We see a number of areas where we have two stores that we will be able to consolidate into one store and capture the same amount of sales with an increased earnings from that store. It will be a year with quite a lot of activity on the store network. Finally, we continue our growth on the green area, with Firtal, with our own channels, and now also Kosmolet, the acquisition of Kosmolet, and the brand Nilens Jord, which is firmly positioned within the green space.
Finally, underlying, we will see a lot of changes in how Matas operates, continuing to operate as an ever-smarter retailer, more data-driven retailer. If you please turn to slide 14, I would like to make a few comments on our acquisition of Kosmolet. The brand Nilens Jord, which is owned by Kosmolet, is the biggest makeup brand in our business overall. It is also one of the market-leading brands in Denmark overall. It has been growing every year since we started our collaboration in 1993. They have built a spectacular brand with a very loyal following, and they have built a very good business along the way as well.
We approached the owner. The owner was ready to do a generational change. We think that we can make this a great franchise grow even more and make the number one brand even stronger than it is today by obviously bringing our power of distribution, marketing and media, and our multiple e-commerce platforms to play together with the very strong brand equity in Nilens Jord. Also, the skills that Kosmolet brings to the table with regards to product development, which they do a very good job at. Also, they have a wholesale operation selling the brand outside of Matas as well. Matas is by far the biggest customer. We would like to continue that wholesale business going forward. We think it will be even more attractive to carry Nilens Jord given that we will invest in developing and strengthening the brand overall.
If you please turn to slide 15, just the deal highlights. As I mentioned, we see this as a strategic acquisition. We see it as a very low-risk acquisition with very tangible synergies and additional growth potential. It is the number one makeup brand today with consistent growth. It strengthens our brand portfolio within a very key category, beauty and makeup in particular, which is very important to us. We have actually wanted to build our own makeup brand for years and years. Now we got the opportunity to acquire the most attractive one of them all. It ties in nicely to our overall strategy of increasing our own brand sales as a portion of the total sales as well. We think that it's always been important for a retailer to have their own brands, and it's probably going to be even more important looking forward.
It is a margin-expansive acquisition given that there's some elimination of revenues because we are the largest customer. It will add margin to our business. As I mentioned, we do see additional growth potential both within our own channels and outside in Nilens Jord. We know the company extremely well from our collaboration. They are doing a very good job, so we foresee a limited integration issue, and we have a quite clear plan of how to get the synergies out within the first year. The deal highlights, Kosmolet, the last published reports, an annual EBITDA of DKK 19.4 million. We expect annual sales and cost synergies of more than DKK 5 million once the integration is completed. The enterprise value for Nilens Jord came in at DKK 145 million, with DKK 135 million in cash at closing, which we expect to be mid-June, and DKK 1 million in Matas shares.
Excuse me, DKK 10 million in Matas shares. Sorry, DKK 10 million. Thank you, Anna. Good to have you by my side. That gives us an EV to EBITDA multiple of 7.5 before synergies and 5.8 post synergies. On top of that, there is an earn-out agreement with the seller of up to DKK 20 million based on short-term financial performance. I should mention that the deal is contingent on a very limited confirmatory due diligence, and we expect closing in June. Our plan is to continue operation with Kosmolet as a standalone company to maintain their own culture and their brand equity. They live quite close to us, so it's not a logistical challenge. We look very much forward to working with the team. If you please turn to slide 16 for the financial targets for this year. We expect revenue growth of 3.5%-6.5%.
We expect underlying revenue growth of 0.5%-2.5%. We have an EBITDA margin guidance before special items between 14% and 15%, and we increase our CapEx as planned to DKK 200 million-DKK 220 million. If you please turn to slide 17, a few remarks on the issues related to the guidance. As for the underlying revenue growth, we do see tailwinds from omni-channel. We are really making headways in having the two channels that we operate help each other. I've commented on that a number of times, how we do that, but it's really an area where we do see some tailwinds. Of course, we do see the structural challenge going forward of declining footfall to physical retail, and we expect a moderate increase in price competition as well for this year.
Overall, for top-line revenues, we do get the full financial year effect of Firtal, and that obviously drives the main part of our top-line guidance. We are being helped by one more trading day. We do see a number of areas, not a lot, but a few areas where we could open stores, and there is a very minimal effect of Kosmolet coming in, given that we already account for the major part of their sales. The headwinds on top-line revenue is potential closure of stores. We maintain our policy of being very impatient about stores that underperform, so we close stores and consolidate stores to always have a healthy store network. We also could see some more online competition as a headwind for the year coming.
As for the EBITDA margin before special items, a number of things to note, that it is, as I mentioned before, a conscious decision to add costs to fuel future growth. We do see tailwinds from continued supply alignment, from continued progress on our promotional effectiveness, and from the data-driven work that we're doing. Of course, as well from the consummation of the Kosmolet acquisition. Headwinds, as we mentioned a couple of times, there will be short-term margin dilution from the rapid online growth. Again, it is an area that is scaling quite rapidly, and we are firm in our belief that it is the right strategy to pursue an aggressive online growth strategy.
Finally, for CapEx, we've increased CapEx in line with our overall strategy to fuel the investments both in the store network and renewing the store network and our online growth, as well as IT to always make sure that we are competitive on those very important parameters. If you please turn to slide 18 for the capital allocation. Our overall principles for capital allocation are unchanged. We maintain a target of a gearing between 2.5 and 3x EBITDA to a net interest-bearing debt. We highlight that the gearing ratio should not materially exceed 3 for longer periods of time. It can exceed for a few quarters, but not for longer periods of time. Then investments, then finally, distribution of excess capital, which we will maintain an ambitions to.
As for the dividends gearing and total investments for 2018-2019, we propose a dividend of DKK 3 per share, equivalent to 33% of adjusted net profit, or DKK 115 million, based on the gearing of 2.7 at the end of the financial year, combined with our financial ambitions. The total investments of DKK 239 million, including the CapEx of DKK 128 million and the acquisition of Firtal for DKK 110 million, and in line with the financial targets of 2018-2019. Finally, Anders can comment more on this, our loan agreements are based on pre-IFRS 16 gearing measures. Going forward, we expect a payout ratio of a minimum 30% of adjusted net profit. That concludes the capital allocation and the overall run-through of the financial year, and we will now turn to Q&A.
Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press star and one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the hash key. Once again, please press star and one if you wish to ask a question. Your first question comes from the line of Poul Jessen, Danske Bank. Please go ahead. Your line is open.
Yes. Thank you. I have a few questions. First, on the market-
Poul, we can barely hear you. Can you turn up the volume a bit?
I'm here now. Better?
Yeah. Thank you.
Better. Much better. Thank you. Better.
Okay. On the general markets, could you give an update on how you look at the markets now that we can also see that a company like Normal has started closing stores, although small numbers, but still closing stores? On the gross margin, the strong gross margin, you say for the full year that it's smarter campaigns and price management. Is that also what's driving the fourth quarter gross margin improvement? On one of the business lines, the Vital, if you take out the online part of that one and then just take the old business line, then it seems as if it's down about 16% year-over-year. Is there anything special in that change? Thank you.
Could you repeat?
The last one I wasn't quite sure what you meant. Is that the other sales you're talking about?
No. If you take Vital and you take DKK 140 million in revenue, and you had DKK 114 last year, and then you subtract the online part coming from Firtal, then the non-Firtal revenue on that line should be down about 15%. I assume that Firtal is included in the Vital line.
No. Firtal is actually distributed across a number of lines-
Okay
There is also a chunk of Firtal in beauty. Yeah.
Okay. We can't do that count.
As mentioned, Vital Shop area increased also for Matas.
Not dramatically, but it had positive growth.
Okay.
I guess you'll take the market.
Yeah. For the market outlook, I think there are two separate issues on the market. One is that we see offline competition or competition in the physical world. It has not materially increased. We still see a lot of promotional activity in the market compared to a few years ago, but we haven't seen any structural changes in the physical retail space. There's more pharmacies than ever. We have Normal Supermarkets are still aggressive on price. We expect that pressure to continue, but we don't expect a structural change for the year.
Yeah.
As for online, I think there are a number of local players that are growing and a number of the international players that are in the market as well and have announced their presence. We do foresee for the year that the competition in the online space will heat up. On the other hand, we feel that we are now at a place with our own proposition where we can compete effectively.
Okay.
As to the gross margin, specifically in the fourth quarter, as I'm sure you all know, there are always some end of year effects. You could say that the end of year effects this year around were a bit more positive than they were last year. It's a bit difficult to put the exact numbers on, still, it's a combination of that underlying improvement and then some, particularly some effects in the fourth quarter, which added a bit as well.
Can you split how much is underlying and how much is special?
No. That I can't do.
Okay
with any great precision, I'm afraid.
Okay. The final one here on Kosmolet. You will have this net contribution of DKK 25 million on EBITDA next year or this current year. How should we look at that?
That's not likely to be this current year. As we said, it's after we fully have all of the expected synergies in place, that will not be in our 2018/19 year.
Yes. We have a plan to realize those synergies.
Yeah.
Some of those synergies are related to commercial activities and sales. They have a longer period of running in. There are also some cost synergies that have maybe a shorter one. To be safe, it is after 12 months, we expect the effect that we mentioned, DKK 25 million.
Should we assume the DKK 20 million to be in this year? Annualized?
I think that-
It is a better guess than the DKK 25, obviously, we haven't actually taken over the business yet, and there might be a few hiccups in just after we take it over. Remember also, it is not a full year effect.
Yeah.
In all honesty, 20 on the first year is probably on the high end.
When you haven't seen the books, you can't give an indication on how you're impacted on the gross margin and the other cost lines?
No. We can't give you a precise number, obviously, at this point in time. We can say that there is going to be an uplift in the gross margin. That's quite obvious because we are integrating up the value chain.
Okay. Thank you.
Thank you, ladies and gentlemen. As a reminder, if you wish to ask a question, please press star and one on your telephone. There are currently no further questions. Please continue.
Well, if there are no other questions, we'd like to say thank you.
Sorry. We've just had some more questions come in.
Okay, good.
Good.
Thank you. Your next question comes from the line of Claus Almer, Nordea. Please go ahead. Your line is open.
Thank you. Yeah, a few questions from my side. Given Firtal is your first real acquisition, you are not disclosing that many numbers. Maybe you could give a little bit more into how much it impacted the revenue this year, how much it is impacting next year, and just to be sure, your like-for-like growth guidance, does that include in any way Firtal revenue? That would be the first question.
Yeah. Just technically on like-for-like, they are not included in the like-for-like guidance, and they will not kick into the like-for-like numbers until the fourth quarter of this year we are in right now.
There is actually a slide on exactly how they will be part of the like-for-like guidance in the appendix for the presentation on slide number six.
22. They will be included from December 2019, for four months.
That is included in the guidance or that would be.
That is included in that small effect in four months of this financial year. That will round off in the roundings, to be honest with you.
Okay.
When you say about their revenue, on one of the first slides, slide four. You can see that they are 1.8% of total revenue, that is their contribution to turnover this year. I think we are giving you quite a lot of building blocks.
They were 5.3% of turnover in the fourth quarter.
That is only online revenue. 1.8 is out of this 11% of your revenue. Is that how you do the math?
1.8 is out of the total group revenue.
Okay
for the entire year.
Okay.
You basically, I would say, have a lot to estimate on.
I think you basically have all the numbers you need.
Okay.
Except the numbers, specifically close numbers that we put in for Firtal in 2020.
Fair enough. About the mass beauty segment and the private label. You had a small decline in the mass beauty. Does that also includes that your private label products did also decline, or how is the mix between those two things?
Actually, well, private label, we have the Striber primarily in the mass business. Actually, they have stabilized over the year in terms of volume. We still see a slight decline in terms of value. Just at the end of the year, we did a range extension on the core franchise, the Striber, which were off to a very good start. Private label share, and I should note as well that the Nilens Jord is within the mass beauty segment. It is a semi-selective mid-priced cosmetics brand. That will aid us in that regard as well.
Striber, which is the old Matas brand, seems to be stabilizing. Let's just call it like that. Now you're buying another private label assortment. Should we expect that to be a flattish assortment, or do you expect it to be a growth area? Does it have a different exposure than Striber?
There will actually be a significant uptick in the share of own label once Kosmolet is fully in the books. I think the last number we announced last year was around 14%. We're heading back towards the territory that you once knew. I think it's probably around 16%, 17%, 18% would be a good guess.
I was more thinking about the organic development.
It's a fair point, Claus. I think the number that Gregers just mentioned is the sort of technical uplift when Nilens Jord become known brand rather than a brand from a supplier. On top of that, you can say we are expecting our own private label to develop more or less in line with what we have general expectations. We don't have an expectation for our own private label to have a massive gain of market share, so to speak, in this year, in 2019-2020. I think that's probably what you're asking.
Just the final question regarding your EBITDA margin guidance. If you look at how that margin has trended over the last couple of years, it started out taking a larger dip than this year, this reported year, it only slipped a bit. Looking at your guidance, at least on mid-range of the guidance, checking out your acquisition, it seems again to be guiding to take a sizable decline. As I understand, this is partly caused by the fast growth in the online space. Can you put some more color to this evolution or the trend of the EBITDA margin?
Yeah, I think it's a really fair question. The dilution is one important factor, given that we now have such a significant part of sales that goes through online. That's definitely one to factor in. Also in that regard that we do drive growth quite dramatically as well online. Again, we see that the underlying trend on our online business is that it scales well with growth, and that we also see an improvement in the growth margin. Over time, in the strategy period, from a business point of view, we will be indifferent as to whether the customer shops online or in the store. That is our long-term vision, and I think that's achievable based on what we've seen so far.
The other part of the margin contraction for next year is a discretionary decision on our part to continue to invest, if you will, or add costs to drive future growth. We think the only way forward for Matas for the coming years is to become a more growth-oriented company, and we will make sure that there are resources allocated to driving those growth initiatives.
Okay. Can you put I'm sorry.
If I can say, it's not just a commercial falling knife, it is more of a conscious decision on our part to be aggressive on digital and to add costs to drive future growth initiatives for the next year. Remember also, it's a year of quite a lot of remodeling with the stores. We do have areas where we are double-costing for periods when we do remodels of up to a minimum 30 stores.
Okay. Can you put some more color to the, let's just say, gross margin differences between the store network and the online? Is it a profitable business at this current scale?
It's a profitable business. We can say we don't break it out, Claus. I think this is one of the most commercially sensitive areas, obviously, with the increasing competition in online. We can say it's not an order of magnitude difference.
On the gross margin point of view?
Yeah.
Okay.
The overall P&L for an online business is obviously very much different from the P&L of a physical store, and that's important to take into account as well.
Sure. Okay, thanks.
Thank you. Your next question comes from the line of Poul Jessen, Danske Bank. Please go ahead. Your line is open.
Thank you. It's just a very short one. It's on Note 20.
Yeah
Where you say that this has been a decision by the EU court in February about your tax claim.
Yeah.
Does that mean that you are getting closer to getting the DKK 80 million back? Now, not from the tax authorities, but from-
We're not getting them from the tax people. The story is, of course, that as you know, we were one of the companies that were sort of caught up in this whole business about withholding tax on interest payments. There was, as I'm sure you also know, a very surprising, at least surprising for most people, decision by the EU court to say that probably the Danish tax authorities were in the right rather than in the wrong. That means for us that we probably, again, it's not something that's going to happen tomorrow, but we probably will have to take up the claim with our previous owners rather than with the tax authorities.
Now, whether or not this will actually turn up as a check in my inbox straight away is a very good question that I'd love to answer, but I really don't have the answer to. Obviously that is why it has been reclassified in the account.
You still take it as in current asset?
That, to be honest, is at least as current now as it was before. It could be argued perhaps that how current is it or how current was it before? You're right, we do take it as a current asset.
Okay. It could still be years out?
Yeah, I would not entirely disagree with you on that particular point.
Okay. Thank you.
Thanks.
Thank you. We have one more question, and the question comes from the line of Alexander Edelman from Nordea. Please go ahead. Your line is open.
Yes. Thank you. A few questions from my side. You write in your report that you have opened four new Matas Life stores in Q4. I was just wondering, what is the feedback from the customers, and have you seen any increase in your traffic compared to your normal stores? If you can just briefly talk about that.
The Matas Yeah. You want to run through the other questions, or should I-
No, if you could take that first, I will ask my second question after.
Just for clarity, Matas Life is our next generation concept for the existing Matas stores. It's not a new concept on the side of the existing Matas stores. We did in the financial year four upgrades, and in the financial year it was less than a month with one store, so it's very hard to say anything. We can say that we got very good feedback from customers, and I guess you can imply or extrapolate from our decision to move forward with investments this year that we are pleased with the results that we're seeing.
Thank you. My second question, you write briefly about the newest online initiative called subscription service. Have customers actually started using this service, and what is the demand from the customers?
We do see some successful subscriptions model in the market overall. Again, this was an initiative that started very late in the financial year. It was off to a good start, but frankly, in the financial year, it was a soft launch. I don't think the numbers will be meaningful to share. It was launched, I think late February, and hardly an uptick. It's an area where I think you should take it as another sign that we are serious about being innovative in the digital space and exploring the different kind of business models. Also our friends at TS, they are experimenting with the subscriptions as well.
Thank you. My last question. You're guiding for like-for-like revenue growth of 0.5%-2.5%. To what extent is that impacted by the weather going into Q1? I know, I mean, last year with weather, warm weather, sunscreen.
That's a wonderful question. I think we have to be true to the words that we said last year when you asked the same question, that we count the weather. Sunny weather does two things to us. It helps us sell a lot of sunscreen. However, sunny weather, particularly when it's in the summer break, it also keeps people away from the store. It's kind of a little bit of each effect with the weather.
Just like the farmers, it's either it rains too much or it rains too little.
Yeah. All right, I think I remember that you answered that you had a net positive effect from the sunny weather.
Yes.
Yeah. That is correct.
That is fair to assume.
That's a fair assumption.
All right, cool. No further questions.
We are only still in May, so we're still hoping the weather could improve.
Me too. Yes. Thank you.
Thank you. There are currently no further questions. Please continue.
If there are no more questions at this point, as usual, you're more than welcome to reach out to us during the day if you have more follow-ups. We will see a few of you tomorrow. We are looking forward to that. Thank you so much for taking the time, and speak soon. Goodbye.
Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.